Canada

Canada

Building a wind industgry in Quebec -- Bids to meet call for 1000 MW of wind total 3995 MW

Canadian utility Hydro-Quebec has received 32 bids totalling nearly 4000 MW in response to its request for proposals (RFP) released more than a year ago for 1000 MW of wind energy. Nine developers submitted project proposals with delivery dates ranging from December 1, 2006 to December 1, 2011. The utility wants to buy the 1000 MW over a period of seven years ending in 2012. It expects to announce the winning projects in September.

The average price of wind power in the bids is a relatively high C$0.10/kWh ($0.073/kWh) in 2007, "increasing with inflation thereafter." The utility's cost estimate includes an average of C$0.081/kWh for the energy, C$0.01/kWh to cover the estimated C$400 million cost of integrating and connecting the new wind power facilities and C$0.009/kWh to balance wind's variability. The price level, say some observers, reflects the requirement for considerable local manufacturing content in the wind turbines and location restrictions. Many warned from the start that these requirements could push up the costs, at least in the short run.

The provincial government, which owns Hydro-Quebec, has made it clear that it sees the wind industry as a way to create jobs and investment on the economically depressed Gaspé Peninsula. Not only must the projects be installed in the regional municipality of Matane on the south shore of the St. Lawrence River, or in the administrative region of Gaspésie-Iles-de-la-Madeleine, which rounds the tip of the peninsula and includes a sparsely populated archipelago in the Gulf of St Lawrence, but the turbine nacelles must be assembled there too. In addition, 40% of project costs for the first 200 MW must be spent in the region, rising to 50% for the next 100 MW and 60% for the remaining 700 MW.

"The regional content as imposed has pushed up the prices," says Jean-Louis Chaumel, who heads the wind group at the University of Quebec. He adds that actual bid prices range from about C$0.07/kWh to about C$0.11/kWh. "Projects located far up the Gaspé Peninsula are quoted higher than the projects located in the easier Matane region," he says. "This is also a no-risk strategy from the developers and manufacturers."

Chaumel believes Hydro-Quebec may be pursuing its own strategy in its release of the bid information. Along with the average wind cost estimates, the utility outlines costs of other sources, showing that wind is more than C$0.02/kWh higher than its closest competitor. "They are trying multiple strategies to demonstrate to the government and the population how they are justified in going ahead with gas projects," says Chaumel. The Quebec government recently suspended its approval of the utility's 840 MW Suroît gas-fired power plant in the face of public protests and calls for cleaner sources of power such as wind.

Chaumel believes the strong response to the RFP will put pressure on the government and Hydro-Quebec. "Globally speaking," he says, "this success, in terms of number of developers and projects, is an additional nail in the building of a strong wind development in Quebec."

One manufacturer

As part of their bids, developers were asked to provide a guarantee from a turbine manufacturer that it will set up assembly facilities in the region. The final bids list Spain's Gamesa Eólica, GE Wind Energy and Vestas Canadian Wind Technology Inc. Hydro-Quebec did not reveal which bids were associated with which manufacturer, and some bidders do not want to discuss the specifics of their plans. It is known, however, that some developers bid different projects using different manufacturers. It is generally felt within the industry that in order to make it attractive to invest in local assembly facilities most, if not all, winning projects will use the same manufacturer.

The list of bidders is a mix of established wind companies, Canadian industry newcomers and international players. Investissements St-Ulric, a consortium made up of Vancouver-based Greenwind Power Corporation and Gamesa, leads the way with nine projects totalling 1004 MW. Cartier Wind Energy, made of Innergex, a Quebec hydro producer, TransCanada Energy, a Calgary power producer with a 4500 MW portfolio, and UK-based Renewable Energy Systems, proposes seven projects with a combined capacity of 839 MW. VEO Venture, a consortium that includes Calgary's Vision Quest Windelectric, pipeline giant Enbridge Inc, and US developer Orion Energy, bid five projects totalling 495 MW.

Groupe Axor, developer of the 100 MW Le Nordais wind project, Quebec's largest, proposed three projects totalling 531 MW, while Invenergy Wind Canada LLC, a subsidiary of Chicago-based Invenergy Wind LLC, has two sites totalling 450 MW. Toronto's Northland Power bid three projects with a combined capacity of 400 MW. The Listiguj Wind Project is a 168 MW proposal by a Mi'kmaq First Nation group planning to install the turbines on the Listiguj reserve. Forestry giant Domtar proposes a 75 MW project, while Boralex Inc, a Montreal company active in France's wind market, proposes a 33 MW project.

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